Alaska health care providers sue to keep state rule mandating minimum payments for care

By: Andrew Kitchenman/Alaska Beacon
The Alaska Division of Insurance of some health care providers disagree about the impact of a state regulation setting minimum payments for out-of-network providers. Provider groups sued the state this week. (Photo by Valeriya/Getty Images Plus)

A group of Alaska health care providers has sued the state government, seeking to keep in place a state regulation that sets a floor for how much private health insurance plans pay for out-of-network services. 

The Alaska Division of Insurance plans to repeal the rule effective Jan. 1. The regulation, which has been in place since 2004, applies in situations where a private insurance plan is paying for health care delivered by someone outside of its network of providers.

Without the rule, “there’s no incentive whatsoever” for insurers to negotiate with providers, according to Dr. John Morris, who chairs a coalition of doctors that, along with other provider groups, filed the lawsuit Monday in Anchorage Superior Court.

The rule requires that out-of-network providers be paid at a level equal to the 80th percentile of charges billed by all providers for a service. For example, if five providers billed for a service, an out-of-network provider must be paid at a level equal to the second-highest of the five. 

The rule was introduced to prevent patients from having to pay large amounts that weren’t covered by insurers. 

In 2020, Alaskans paid more than 50% more per person than any other state for health care services billed by doctors, according to federal statistics tracked by the health-focused foundation KFF. Overall health spending was second among the states, after New York. 

State officials say data show that the rule they’re seeking to repeal puts upward pressure on health care spending. 

The providers who sued reject a link between the rule and Alaska’s high prices,  saying that the data the state used is either outdated or opaque. The lawsuit describes the process the division followed in the regulation repeal as “arbitrary and unreasonable.” Morris said the repeal served the interest of Premera Blue Cross Blue Shield of Alaska, the state’s largest private insurer. 

“It’s a bit tiresome to vilify an entire profession because an insurance company wants to make more money,” he said. 

Dr. Steven Compton, president of the Alaska State Medical Association, said the primary reason for high health care prices was the high cost of providing any services in the state. 

“It’s an expensive place to run anything,” he said. 

Compton said that health care costs, quality and access are all interrelated. If costs go down, quality and access may suffer. 

Compton and Morris said Premera would seek to reduce the number of providers in its network and that patients would ultimately face paying bills out of pocket. A recent federal law, the No Surprises Act, bars these surprise bills for emergency department visits and other services provided in in-network hospitals by out-of-network providers. But the providers say this law leaves many other out-of-network services unprotected.

Along with blocking the rule repeal, the lawsuit seeks access to communications between state officials and Premera leaders.

The lawsuit was filed by the group chaired by Morris, the Coalition for Reliable Medical Access, as well as the Alaska Medical Group Management Association, the Alaska Physical Therapy Association Inc. and the Alaska Chiropractic Society.

In response to a request for an interview, a Division of Insurance spokesperson emailed a statement saying the repeal process complied with state law. The division noted that Alaska is one of the only states to mandating minimum payment levels. In addition, the division noted that private insurance plans only account for 20% of health care in Alaska, and the rule didn’t apply to Medicare, Medicaid, the Indian Health Service, Veterans Affairs, TriCare and self-funded plans.

“The cost of health care is directly related to the insurance premiums that consumers pay,” the statement said. “In order to reduce insurance premiums, the State of Alaska concluded that repealing the 80th Percentile would be a first step.”

The division noted that the Alaska Chamber supported the repeal, and that employers said in a 2019 state survey that reducing the cost of health care is one of the top things needed to improve Alaska’s economy.

A Premera spokesperson said executives familiar with the repeal weren’t available for an interview due to the Thanksgiving holiday, and that the company usually doesn’t comment on pending litigation.

The lawsuit has initially been assigned to Superior Court Judge Adolf Zeman.